“For the insiders to buy anything, someone else has to sell it. The poor schmuck that didn’t have that inside information sure as hell lost a bunch by selling at the lower price.”
But I’m trying to understand the moral problem. He didn’t have the information but the information is real, not false.
Imagine someone sold a piece of wood for $1. He doesn’t know what to do with it but you have a pretty good idea that you won’t share with anyone else. You decide to build something worth $1,000,000 out of that piece of wood. You have an information advantage that the other guy didn’t have. Isn’t that the same as insider trading?
No, that’s called value added. Big difference.
No, more like the insider knows that the piece of wood will be worth 1000X tomorrow morning because that is when a major ban on foreign lumber is going to be announced. Now the insider isn't going to do a freaking thing with all that lumber, he will sell it in the market the next day at the 1000-X inflated price.
THAT is how insider trading works.